Update: Personal Income Tax Finalization for Foreigners in Vietnam
Feb. 7 – On January 15, the Vietnam General Department of Taxation issued Official Letter 187/TCT-TNCN (OL187) to provide guidance on the finalization of personal income taxes (PIT). Some of the key updates can be found below.
183 Day Rule
Foreigners who work in Vietnam do not have to pay PIT if they spend fewer than 183 days in Vietnam in their first calendar year. If they return and live a total of 183 or more days in Vietnam, then they will be subject to PIT starting from 1 January (not the date of their arrival).
Calculations Based on Calendar Year
Foreigners who finish their Vietnam assignment and depart but return to work in the same calendar year are required to complete the PIT finalization covering the entire calendar year.
PIT Finalization by Employer
An employee can authorize an employer to conduct PIT finalization on their behalf unless:
- A PIT withholding receipt has been issued to them
- The employee did not sign a labor contract
- The employee signed a labor contract with a term of less than three months
- The employee signed a labor contract with a term of more than three months but they have more than one source of employment income
- The employee signed a service contract that already has 10 percent or 20 percent PIT withheld
Individuals subject to any of the above conditions must conduct PIT finalization by themselves directly with the tax office.
Deductions for Dependents
Individuals that have obligations to dependents are allowed to take out deductions for their dependents from their monthly PIT filings starting from when they register. For this, the dependent(s) must be registered properly prior to the time of PIT finalization. Individuals who have already registered their dependents but change their place of work must resubmit copies of the information of their dependents that has already been certified by their former employer to their new employer.
If PIT exemptions are claimed, statutory forms (i.e., Form 27/MGT-TNCN and Form 26/MGT-TNCN issued under Circular 140/2012/TT-BTC) must be submitted together with the final PIT return.
Individuals who conduct their tax filings directly with the tax authorities but have overpaid for their tax returns can be refunded the difference or have that difference deducted from the next cycle of PIT finalization.
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Mr. Alberto Vettoretti, Managing Partner of Dezan Shira & Associates China and Vietnam, discusses the key taxes affecting foreign companies and individuals in Vietnam.
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